All In The Game, In Theory

There's a fascinating article in the New York Times about Bruce Bueno de Mesquita, a game theorist who models the way networks of influence behave, and predicts the outcome of complex situations 'where parties can be described as trying to persuade or coerce one another'.

His work leads him to make some bold and far-reaching predictions about the outcome of currently unresolved political conflicts and standoffs. Some are optimistic (Iran will not make a nuclear bomb), others less so (most nations will welsh on the commitments they make to reduce carbon emissions at Copenhagen).

Bueno de Mesquita's track record in making successful predictions appears to be rather better than, say, Nostrodamus'. So why isn't he better known and continually in demand by corporates and politicians the world over? Bueno de Mesquita himself puts it down to his being a lousy salesman. But the Times also suggests that there's significant resistance to the idea that a mathematical model - however sophisticated - can take the place of intuition, inside information and gut instinct - the stock-in-trade of many political analysts when making predictions.

At GlobeScan we use statistical models of a different (and rather simpler) kind in our corporate reputation work, and this resistance is something I've noticed on more than a few occasions when presenting to clients. If we're looking at patterns in survey data to identify how issues cluster together in the minds of stakeholders, or using regressions to identify what factors really do drive an organisation's reputation, there's often a sceptic or two who will question whether we can really believe what the modelling is telling us. 'Is the way we're seen to treat our employees or our environmental track record really more important than our ads in driving our reputation?' Valid questions, for sure - but like Bruce Bueno de Mesquita, we've seen enough over the years to have confidence in our models.

I hope he's wrong about Copenhagen, though.

The Banking Sector: Do We Need a Cultural Revolution?

The fallout from the financial crises of the last eighteen months has seen a lot of scapegoating, with the finance sector’s bonus culture a frequent target. The Economist recently examined two pieces of research into what drives the performance of CEOs, and what impact the culture they promote has on their organisation’s success. Some of its conclusions are surprising.

Seeking to test the hypothesis that companies irresponsibly chasing short-term gains were largely responsible for the crisis, the first paper looked at how different types of incentives for CEOs affected the performance of financial sector companies during the credit crunch.

The interesting conclusion was that higher long-term incentives were correlated with poorer performance during the credit crunch. Moreover, the use of share options, which have been dubbed “managerial heroin” for their propensity to encourage bosses to seek short-term highs at the expense of long-term stability, was not observed to affect performance one way or the other. A final note to those keen to punish bank executives financially for their role in leading us into depression: most of them have already lost enormous amounts of money by refusing to sell their shares in their own institutions as they collapsed in value.

The second piece, which caused those of us at GlobeScan who regularly work on employee surveys to take notice, used a survey of 793 American CEOs to determine the impact of “organizational identification” on performance. In other words, if bosses feel a deep connection to their company does this help them to make the right decisions on its behalf? Using questions such as “when I talk about [the organisation] I often say ‘we’ rather than ‘they’,” and “when someone criticises [the organisation], it feels like a personal insult,” the researchers found that organizational identification made bosses less likely to take perks such as corporate jets, or to take risky decisions such as diversifying into new business areas. This led to a reduced need for costly and cumbersome oversight or large long-term incentives.

The finding leads me to wonder about the wider effect of corporate culture on a business’s (or indeed any organization’s) success. Some may take it for granted that it is desirable to have an employee base that is motivated by the success of the organization and feels a sense of personal identification with it, but it may not be straightforward or cost effective for an organization to change a culture that is not working. There is a substantial literature on how positive cultures are associated with high performance: this 2005 study by Coogan & Partners being one example. How, then, do you measure and manage your organization’s culture?

New Global Water Certification Program Responds to Water Worries

Water sustainability is a major emerging issue and one that affects a huge number of people. Climate change is expected to lead to increased drought, while a growing (and in some parts of the world increasingly prosperous) population puts increasing pressure on scarce water resources. The BBC notes that the malnourishment of more than 800 million people is associated with a lack of water to grow their food, while water-borne diseases affect more than half of people currently occupying the world’s hospital beds. Safe, clean drinking water is a luxury that more than one billion people have to do without.

The World Water Week in Stockholm, Sweden, is an annual meeting where experts, practitioners, leaders, and decision-makers get together to focus on the world’s most urgent water-related issues. Held August 16-22, this year’s meeting brings together perspectives of scientific, business, policy and civic sectors from around the world to explore the theme of access to water in the face of uncertain availability coupled with growing demand.

One solution to the problem of unsustainable water use, put forward at the summit by a group of leading business, social development and conservation organizations, is the development of a new voluntary global water certification program. The Alliance for Water Stewardship has been created to develop best-practice standards for managing water responsibly and to recognize responsible corporations, farming operations, cities, and other water users through certification, similar to the certification of sustainably harvested wood by the Forest Stewardship Council (FSC). Certified companies and other water users would need to meet standards on environmentally sustainable as well as socially beneficial water use.

We've been finding for a while that people around the world are becoming increasingly worried about water- and are indeed more concerned about it than about other high-profile environmental problems like climate change or species depletion. So surely companies that take the issue of sustainable water use seriously deserve to be recognized? A recognized system of certification would make it easier for consumers to make ethical choices, and would benefit companies that recognize just how precious this finite resource really is.

A Healthy Debate?

It's been clear for a while now that US President Barack Obama isn't going to have it all his own way. In particular, his attempts to reform the United States' healthcare system appear to be in intensive care, with his latest compromise proposals achieving the unenviable feat of irritating liberals while leaving his conservative critics unmoved.

While much of the concern centres around the potentially astronomical costs of extending coverage to the millions of Americans currently without health insurance, anything that smacks of 'socialising' the healthcare system seems guaranteed to raise the ire of a significant section of the American general public.

It's a reminder of how different the US mindset is in many respects from the rest of the developed world, whether we're talking about the role of religion in public life, its attitude towards climate change, or taxation. The furore caused in the UK last week by the American right's demonisation of the UK's publicly-funded health service illustrated that - bar the occasional heretic like MEP Daniel Hannan - Europeans are much more comfortable with the state playing a high-profile and overtly redistributive role in their lives. They may whinge about it, but belief in the NHS is a lot more fervent than belief in God in Britain these days.

But if Americans aren't sold on 'socialised medicine', they clearly perceive the need for reform of some kind. Every couple of years, GlobeScan asks the general public in over 20 countries to name the most important issue facing their nation. Our latest data, just out of field, shows that Americans are by some distance the most likely of any country surveyed to mention health care costs - in fact, it's the second most mentioned issue. So maybe Obama is right to persist.

What's the top issue preoccupying Americans then, you ask? With apologies to Bill Clinton, it's the economy, stupid. As it is everywhere else. Maybe Americans aren't so different from the rest of the world after all.

Where Electronic Waste Goes to Die

As we’ve noted, the issue of electronic waste is again rising up the environmental agenda, and perhaps it is time to ask whether the IT industry really deserves the high reputation for responsibility that we’ve observed it has among consumers around the world. Canadian broadcaster CBC has featured in their program “The National” (E-waste Dumping Ground) the dubious trade in highly toxic materials extracted from recycled electronic equipment, much of which originates from North America.

According to the CBC, lax laws governing the trade in hazardous e-waste in Canada and the US are partly to blame. Despite a UN agreement banning the practice of shipping it from rich to poor countries, some campaign groups claim that as much as 80 percent of used electronic equipment in North America collected for recycling is shipped to the developing world – often to China – with some of the rest processed in US prisons, where oversight and regulations are often lacking.

In the absence of legislation, it appears that few recycling firms find it economical to invest in the advanced technology or labour required to process e-waste responsibly in the West, while in developing countries, enforcement of worker protection or environmental regulations is often poor or non-existent. The impact on developing countries of this failure to act responsibly in terms of worker exposure to toxins when disposing of electronic chips, or water pollution resulting from the stripping of parts in acid, is sobering.

Arguably, the manufacturers are not the chief culprits here. Nevertheless, it is difficult to see how they can entirely wash their hands of responsibility for what happens to the components in their hardware when the industry’s business models depend on consumers being persuaded to upgrade or replace hardware every eighteen months or less. Nokia wins plaudits from Greenpeace’s ‘Guide to Greener Electronics’ “for leading competitors on toxic phase out” and for its voluntary take-back program. It will be good to see others follow their example.

Europeans Warming to Carbon Taxes?

Les Echos are reporting a new Eurobarometer poll that reveals there is, apparently, significant support across Europe for a carbon tax on products that damage the environment, with nearly half (46%) supporting it as long as it was paired with reductions in taxation for more environmentally-friendly products.

But governments should probably be wary of taking this as a green light to introduce carbon taxes – other data suggests that consumers remain more price-sensitive than ever, particularly in the middle of a recession.

The finding is more interesting for what it says about the way that the carbon footprint of the products we buy has imprinted itself on the European public consciousness in recent times. Whether or not consumers ‘mean it’, and would be prepare to put their money where their mouth is, the fact that so many are prepared to voice their support for tax increases in support of a cause is in itself striking.

It’s also revealing that the British are apparently the most open to the idea of a carbon tax on polluting products. This is very much in line with what we’re seeing in our international tracking and may be a consequence both of the state of the environment debate in the UK and the fact that its consumers are relatively lightly taxed. Though this may be about to change...

There’s lots more of interest in the poll, and we may return to it.

Not such a rotten Apple after all?

It’s revealing that Apple has chosen to highlight the green credentials of its latptops in its latest piece of marketing. Among the ‘reasons you’ll love a MacBook Pro’ is listed the fact that it’s ‘highly recyclable and free of many harmful toxins’.

This used to be something of a weak flank for the Cupertino crew. Despite its much-admired ‘clean’ approach to design, campaigners used to highlight the fact that Apple didn’t apply the same standards of cleanliness in its approach to the environment, and was in fact lagging behind its dowdier rivals in eliminating toxic chemicals like cadmium and lead in its products, the use of brominated flame retardands (BFR) and PVC, and in not allowing consumers to replace or recycle batteries in their iPods.

Historically, the IT and technology industry has come out top when we ask consumers around the world to rate the sustainability of different industries – without much justification, one might think - and indeed, IT companies are notable by their absence when we ask experts to identify corporate sustainability leaders.

But as the issue of e-waste has risen up the agenda, Apple and its rivals have felt the need to up their game. Steve Jobs announced ‘a greener Apple’ in 2007, it now performs respectably in Greenpeace’s annual ‘Guide to Greener Electronics’, and the company recently emerged (mostly) vindicated from a court case where Dell challenged its claim to have ‘the greenest family of notebooks’.

Ironically, this evidence that the industry is starting to take its responsibilities seriously comes just as we’re seeing signs that the shine is coming off its reputation for responsibility with consumers. How long before the industry’s performance is better than its reputation?